Japan and East Asia in Transition

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1 Japan and East Asia in Transition

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3 Japan and East Asia in Transition Trade Policy, Crisis and Evolution, and Regionalism Hidetaka Yoshimatsu The Graduate School of East Asian Studies, Yamaguchi University

4 Hidetaka Yoshimatsu 2003 Softcover reprint of the hardcover 1st edition All rights reserved. No reproduction, copy or transmission of this publication may be made without written permission. No paragraph of this publication may be reproduced, copied or transmitted save with written permission or in accordance with the provisions of the Copyright, Designs and Patents Act 1988, or under the terms of any licence permitting limited copying issued by the Copyright Licensing Agency, 90 Tottenham Court Road, London W1T 4LP. Any person who does any unauthorised act in relation to this publication may be liable to criminal prosecution and civil claims for damages. The author has asserted his right to be identified as the author of this work in accordance with the Copyright, Designs and Patents Act First published 2003 by PALGRAVE MACMILLAN Houndmills, Basingstoke, Hampshire RG21 6XS and 175 Fifth Avenue, New York, N.Y Companies and representatives throughout the world PALGRAVE MACMILLAN is the global academic imprint of the Palgrave Macmillan division of St. Martin s Press, LLC and of Palgrave Macmillan Ltd. Macmillan is a registered trademark in the United States, United Kingdom and other countries. Palgrave is a registered trademark in the European Union and other countries. ISBN ISBN (ebook) DOI / This book is printed on paper suitable for recycling and made from fully managed and sustained forest sources. A catalogue record for this book is available from the British Library. Library of Congress Cataloging in Publication Data Yoshimatsu, Hidetaka. Japan and East Asia in transition : trade policy, crisis and evolution, and regionalism / Hidetaka Yoshimatsu. p. cm. Includes bibliographical references and index. ISBN Japan Foreign economic relations East Asia. 2. East Asia Foreign economic relations Japan. I. Title. HF E2Y dc

5 Contents List of Tables and Figure Preface List of Abbreviations vi vii ix 1 Introduction 1 2 Evolving Policy Preferences in Antidumping Policy 13 3 Social Demand and State Capability in Safeguard Policy 38 4 Japan and the Asian Financial Crisis: The Developmental Initiatives 64 5 Japan and Regional Industrial Transformation: The Strategic Responses 86 6 The Liberal Democratic Party, Finance Ministry and Regional Cooperation Japan and China in Regional Cooperation Conclusions 157 Notes 168 Bibliography 178 Index 191 v

6 List of Tables and Figure Tables 2.1 Number of antidumping initiations in major countries, Antidumping suits in Japan The trends of Japan China trade (US$ million: %) The quota tariff system for three products The annual increase ratio of labour productivity in major developed countries (%) Keidanren s recommendations concerning free trade agreements 118 Figure 6.1 Bilateral swap agreements (BSAs) under the Chiang Mai Initiative 127 vi

7 Preface In the 1990s, Japan was at an historical turning point. Not only did Japan need to shift from the catching-up political economic system to the matured one but it also had to reformulate external policy and relations in response to changes caused by the end of the Cold War. However, political gridlock after party realignments in summer 1993 prevented Japan from tackling these issues effectively through in-depth policy debates. Moreover, a decade-long economic slump has gradually robbed the vitality of the Japanese people and industry. In the new millennium, Japan is facing new challenges represented by the advent of China. Under these circumstances, how to develop mutually beneficial economic relationship with the East Asian countries has become increasingly crucial for Japan s external relations as well as domestic economic performance. Although the importance of alliances with the United States does not change, sincere efforts to show independent initiatives towards East Asia are required. This book seeks to draw a picture of the evolving economic relationship between Japan and East Asia after the mid-1990s by analysing Japan s commitments in the three sets of policy areas: trade remedy measures, the regional financial and industrial transformations, and regional economic integration and cooperation. Theoretically, it highlights the issues of Japan s regional leadership role, bilateral relationship with China, and the influence of domestic politics on Japan s external policy and relations. Different versions of several chapters in this book have appeared in academic journals: Trade policy in transition? The political economy of antidumping in Japan, Journal of the Asia Pacific Economy, 6(1), 2001; Social demand, state capability and globalization: Japan China trade friction over safeguard, The Pacific Review, 15(3), 2002; and Japanese policy in the Asian economic crises and the developmental state concept, Journal of the Asia Pacific Economy, 8(1), Permission to use these materials is gratefully acknowledged. It is a pleasure to acknowledge my debt to those who have provided assistance to the completion of this study. Through the preparation of this book, many scholars have offered valuable comments and suggestions. I am particularly thankful to Shinichi Ichimura, William James, Makoto Sakurai, Eric Ramstetter, Noriatsu Matsui, and Dai Erbiao. I am vii

8 viii Preface also grateful to officials at the Ministry of Economy, Trade and Industry, and Ministry of Foreign Affairs as well as organisations such as the Federation of Japan Towel Industry Associations and Thai Automotive Institute for their spending valuable time for an interview. This book is based on my academic expertises in International Political Economy, International Relations, East Asian Studies and Japanese Politics. I am indebted to Professors Peter Drysdale, John Ravenhill, Barry Buzan, Geoffrey Underhill, Wyn Grant and Aurelia George Mulgan for their intellectual guidance and encouragement. I also wish to express my deep gratitude to three organisations. The first is the International Centre for the Study of East Asian Development (ICSEAD). My interests in East Asia were fostered and developed when I was a researcher at this institute, and talks and discussions with other colleagues helped me develop and sharpen my ideas about the relationship between Japan and East Asia. The second is my current affiliation, the Graduate School of East Asian Studies, Yamaguchi University. The school, founded in 2001 for the doctoral course, provided me with excellent research environments. The third is the Heiwa Nakajima Foundation. The financial assistance from the foundation constituted a base of my career as a researcher. Finally, my gratitude goes to my wife, Mutsumi, and my son, Satoshi. Without their understanding and cooperation, this publication could not have been possible. Hidetaka Yoshimatsu

9 List of Abbreviations ADB AEM AFTA AIA AID plan AJCEP AMEICC AMF AOTS APEC APT ARF ASEAN ASEM ATC BOI CFEOT CLM-WG DIP DRAM EAEC EAEG EC EU EVSL FDI FJKIA FJTIA FTA GATT GDP IIMA IMF IPRs Asian Development Bank ASEAN Economic Ministers ASEAN Free Trade Area ASEAN Investment Area Asian Industries Development plan ASEAN Japan Closer Economic Partnership AEM METI Economic and Industrial Cooperation Committee Asian Monetary Fund Association for Overseas Technical Scholarship Asia-Pacific Economic Cooperation ASEAN Plus Three ASEAN Regional Forum Association of Southeast Asian Nations Asia Europe Meeting Agreement on Textile and Clothing Board of Investment Council on Foreign Exchange and Other Transactions Working Group on Economic Cooperation in Cambodia, Laos and Myanmar Department of Industrial Promotion dynamic random access memory East Asian Economic Caucus East Asian Economic Group European Community European Union Early Voluntary Sectoral Liberalisation foreign direct investment Federation of Japan Knitting Industry Associations Federation of Japan Towel Industry Associations free trade agreement General Agreement on Tariffs and Trade gross domestic product Institute for International Monetary Affairs International Monetary Fund intellectual property rights ix

10 x List of Abbreviations IRP IT JAMA JCFA JCSFWA JETRO JFA JICA JODC JSA JSEPA JTIA JTIF KIEP LDP MAFF METI MFA MFPRI MOF MOFA MOI NAFTA NATO NEDO NIEs ODA PCs PDPs R&D SICGC SIFC SMEs TAI TFT-LCDs TVs VER WTO Industrial Restructuring Plan information technology Japan Automobile Manufacturers Association Japan Chemical Fibres Association Japan Cotton and Staple Fibre Weavers Association Japan External Trade Organisation Japan Ferroalloy Association Japan International Cooperation Agency Japan Overseas Development Corporation Japan Spinners Association Japan Singapore Economic Partnership Agreement Japan Textiles Importers Association Japan Textile Industry Federation Korea Institute for International Economic Policy Liberal Democratic Party Ministry of Agriculture, Forestry and Fisheries Ministry of Economy, Trade and Industry Multi-Fibre Arrangement Ministry of Finance, Policy Research Institute Ministry of Finance Ministry of Foreign Affairs Ministry of Industry North American Free Trade Agreement North Atlantic Treaty Organisation New Energy and Industrial Technology Development Organisation newly industrialised economies official development assistance personal computers plasma display panels research and development Small Industry Credit Guarantee Corporation Small Industrial Finance Corporation small- and medium-sized enterprises Thai Automobile Institute thin film transistor-liquid crystal displays televisions voluntary export restraint World Trade Organisation